An investigation of this magnitude is extremely rare.
A Vancouver securities lawyer who raised concerns from regulators for his association to a U.S.-based stock manipulation scheme has lost an appeal to stop an investigation into his law firm.
The B.C. Court of Appeal ruling gives the Law Society of B.C. the power to investigate the entire practice of the lawyer’s firm since its inception in 2008.
An investigation of this magnitude by the governing body for the province’s legal profession is extremely rare. The lawyer previously won the right to have his case heard with his name protected in a B.C. Supreme Court ruling.
Following Justice Gail Dickson’s October 28 ruling, the lawyer’s only remaining option to end the investigation is an appeal to the Supreme Court of Canada — if granted.
After a routine compliance audit, the lawyer and his firm became the subject of a law society investigation in 2019. The lawyer was suspended for two months for professional misconduct a few months later.
The society then argued it has the authority to investigate the whole legal practice of a member and not just records related to the concerns that triggered the investigation.
“The auditor identified, among other things, that you may have allowed clients to use your trust accounts for the flow of funds in the absence of substantial legal services related to those funds and/or in the absence of making reasonable inquiries,” wrote Anneke Driessen, a law society staff lawyer on Feb. 11, 2020.
“In addition, there are concerns arising from your having acted for or engaged with entities and individuals who were apparently involved in market manipulations as determined by the Securities and Exchange Commission (the “US SEC”),” she continued.
The society plays a crucial role in the enforcement of law practice standards. It can issue both administrative and monetary penalties to lawyers found by a discipline panel to have broken its rules.
In the previous B.C. Supreme Court May 13 ruling, Justice Andrew Majawa noted that the Supreme Court of Canada has determined that both lawyers and their firms are not subject to the Financial Transactions and Reports Analysis Centre of Canada’s (FINTRAC) rules that require them to report on trust account activity.
“A lawyer’s trust account must only be used for legitimate commercial purposes related to the provision of legal services, and it is in the public interest to ensure that trust accounts are not used for other purposes such as the laundering of money,” noted Majawa.
This matter was also discussed at the Commission of Inquiry into Money Laundering in B.C.
Because of the Supreme Court of Canada ruling — wherein solicitor-client privilege supersedes a lawyer’s requirement to be a reporting entity to FINTRAC — lawyers are left to regulate themselves, raising questions about whether they are doing so effectively and ethically.
The society asserted at the inquiry this year that it has robust rules to curb money laundering and other financial crime. Some special interest groups have called for greater oversight of lawyers.